The Grouchy Insurance Guy
“Business is never so healthy as when, like a chicken, it must do a certain amount of scratching around for what it gets”…Henry Ford

Dawn is just breaking….I can see the light beyond the darkness and in 15 minutes all will be bright…another 40 degree day in February…. some suggest it’s global warming..but I got to thinking about that…. two years ago we had a terribly cold winter…and the year before that.. we had a ton of snow and cold… no one blamed it on global freezing… and when we set new records by 1 or 2 degrees… doesn’t that mean that it was at least almost this warm 100 years ago or whenever the last record was set?….. so much for opinions… we all surely have them…

Business has come to a slow crawl….new business that is…so I got to thinking about that as well…. More self analysis forces me to recognize business is bustling..I’m the one that’s coming to a slow crawl…I have to wake up from the winter doldrums and get back to my old self….I recall during the last recession when J. Carter was President.. Gasoline was going to $1.00 per gallon and my father was furious..even a staunch old democrat union guy was fed up…. we were counseled not to “participate” in the recession by our sales manager.   Just a bit of motivational BS you say?… Well, I have come to believe it….if you think it and say it enough, it becomes fact…

I know one thing for certain…activity breeds results…and lack of activity breeds more of the same…..minimal results..so wake up Grouchy…..

I have to meet with a Company Guy today..actually a company gal… very nice woman… About five years ago, they were the hottest company in town…. they priced their insurance aggressively and helped agencies grow…and grow and prosper we did..then the other shoe dropped….you see, insurance is all about numbers…actuarial numbers….meaning… for every insurance risk out there…there is a “rate” you cannot go below and make a profit… some companies do it anyway to meet “growth” needs..

We commonly refer to that as “buying” a piece of the market…  All the other carriers get frustrated and accuse the “buyer” of not knowing what they are doing…or other excuses….but they know exactly what they’re doing..they are establishing a base of business…knowingly (at some level in the company) that they are going to sustain more loss than premium… well, the chicken’s have come home to roost so to speak…

Now my carrier has too many losses to support the premium…so they are now taking aggressive action so that the base of business they “bought” over the last five years makes them an underwriting profit…that’s when premiums exceed loss and expense..and that my friends is where WE come in…see, we are the agents that gave them all that business…. ahhhhh, they were great times….taking candy from babies…writing new accounts left and right…but now….

We lose accounts or they overprice the accounts they have because the actuaries really did know what they’re talking about… so the hottest market in town is now cooled off considerably…meanwhile, they expect the agent to continue to roll the business on the books….and that is the problem.. so we’ll have a nice chat today and find out where we stand…..

Happy Birthday “Idea Guy” and Happy Anniversary “Good Guy”….

Predictably, dawn has come and off I go….action is the word of the day….

“Ya win a few… ya lose a few”…. Unk.

The week ended with a huge dull thud….. I met one of my clients at his place of business….. “you know we get marketed by insurance agents all the time” was the way the conversation began…..oh oh…..”we going with a different broker”….”You’ve been great but……….”.. I felt like a head coach being told the team was going in different direction.

My heart sank….. There was no talking him out of his decision… and we predictably shook hands with the understanding that we would always be welcome back at “sometime” in the future..a common and profoundly insincere way to end the meeting.

They had a growing Work Comp problem and as I often do, I did a “post mortem” on the loss…considering I had been generous with the decision makers over the past four years… and accessible to boot… but in the end, we usually lose an account because we weren’t properly tuned in…. in this instance….lesson learned…I coulda, shoulda woulda done it differently…but any agent who has a book of business loses accounts from time to time…so I had to keep things in perspective.

Friday night was s different matter… as I drove up to the garage, I could see the door cracked just abit… was that smoke or steam coming from under the door?….As I got closer, I could smell the cigar smoke…. I knocked the “secret knock” and immediately the door opened…Inside I found a motley group of middle aged rough looking guys…or were they approaching post middle age?…hmmm… I should know I was the oldest and widest person in the group….

Kemo…..Stretch…and everyone of these guys had a nickname..all with cigars….the turkey deep fryer was crackling away (inside the garage)….the propane heater was going full tilt also inside the garage…the host “kemo” felt everything was perfectly safe….even though they kept the door closed most of the evening..because it was so cold.

so much for the reasoning abilities of my friend….Clearly, an Insurance Companies nightmare….. and he had the worlds smallest television high on the garage wall with what appeared to my cataract clouded eyes a basketball game on…This was one of those guy only events..cigars, Scotch, poker and self abuse….I was honored to be among the group, as they were an old collection of college buddies who have long gotten together for such events..and as such my inclusion for this event was especially appreciated… It didn’t take long after the turkey, half the scotch and two cigars for the group to realize their mistake….I’m not much of a poker player… not their brand anyway… back in my younger days… we played simple games for simple guys..you know…. 7 card stud; 5 card stud; a little black bottom was as wild as we got, and maybe a little blackjack… so the first two thirds of the night was spent learning the games…some were poker..some weren’t…high / lows and this and that..yet, I had a coach to my left and a coach to my right….and in the end, five hours later I lost four bucks….almost lost my lunch from the cigar smoke too, got home at midnight or thereabouts and was never so happy to see my Cpap machine….fresh new air pumped into my lungs all night made the situation better…..I was grateful for the invitation….but I’m not so sure the group found my amateurish poker playing in keeping with their standards…

Last night the Mrs. and I officially celebrated her birthday… dinner at the Capitol Grille…(a great dining experience) and the Lion King…I gotta lose some weight.. the seats were tight and the lady next to me weighed almost as much as me….I felt like I was in a three fat guy aisle in the economy section of an airplane..with a three hour flight..and me in the middle….God, was I uncomfortable…but the Mrs enjoyed the show and here we are today….a new week….

Still licking my wounds from the lost account, I have vowed to simply keep on keeping on….I’ll have to write a lot of business to make up for this last one…and the best insurance tip I can give today… if you want to kill your friends… do it quickly, not with a turkey fryer, propane heater, cigar smoke and closed doors…that takes too long…..but I have to admit, it’s a lot more fun with the turky fryer and semi old guys…

American Drivers, Old Dangers Continue To Claim Lives

Media coverage of driver safety has focused recently on the dangers posed by car technology, from seemingly unexplainable unintended acceleration to problems with keyless ignitions to accident-producing electronic distractions.

But those things aren’t at the top of the driver-danger list for David Strickland, the administrator of the National Highway Traffic Safety Administration (NHTSA).

Instead, Strickland talks first about people driving without seatbelts. Or driving drunk. Or driving aggressively, tailgating and speeding, pushed by “all the ills of an impatient world,” as Strickland puts it. In short, the most critical safety issues facing drivers have little to do with technology.

“Historically, the threats that faced the fleet are still with us,” Strickland says. He talked to Edmunds in an early March interview that touched on several facets of the agency’s safety agenda for 2011 and beyond. Strickland also is a featured speaker at Edmunds’ upcoming safety conference, “Truly Safe? Debunking Myths and Crafting Effective Policies for Car Safety,” May 23 and 24 in Washington.

In 2009, 33,808 people died in traffic accidents, according to the NHTSA. Although that’s the lowest number since 1975, it’s still too high, says Strickland, who has headed the traffic safety agency since January 2010.

The Last 15 Percent: Drivers Who Won’t Belt Up
Thousands of those deaths could have been avoided, he says. One life-saver would be greater use of seatbelts. A 2010 NHTSA study says 85 percent of front-seat occupants use seatbelts, up from 58 percent in 1994. Nevertheless, more than 11,000 people who died in traffic accidents in 2009 weren’t wearing them.

The NHTSA fatality data shows that many of those “unbelted occupants” are driving at night and represent a sizable number of highway deaths. People might not be buckling up at night because they think they’re less likely to be spotted by police, the NHTSA believes. (In other words, they’d drive beltless in the daytime, too, if they thought they could get away with it.)

A 2009 NHTSA study found that well-publicized nighttime seatbelt checkpoint programs could improve seatbelt use.

Drunken and Distracted Driving: A Toll in the Thousands
Drunken driving continues to take thousands of lives, Strickland says. More than 7,000 drivers who died in 2009 had blood alcohol levels above the legal limit of 0.08, according to an analysis of NHTSA data by the Insurance Institute for Highway Safety. That’s more than a third of the 21,798 drivers who died that year. There’s been an improvement since 1982, when nearly half the fatally injured drivers were legally drunk, but there’s been little progress in reducing the number and proportion of fatally injured drunken drivers since the mid-1990s, according to the IIHS’s data analysis.

Finally, there’s distracted driving, which has been in the spotlight in part thanks to Strickland’s boss, Transportation Secretary Ray LaHood, who has made the issue a personal crusade. In 2009, 5,474 people died in crashes that were reported to have involved distracted driving, according to the NHTSA. Of those, about 18 percent could be attributed to a cell phone as a source of distraction.

The NHTSA is particularly interested in making sure its safety messages and programs reach a group of people that’s prone to all three risky behaviors. That’s men between 18 and 34 years old.

“Young men undertake riskier behaviors,” Strickland says. “We are clearly focusing on everyone, but particularly on this part of the demographic.” That’s because young men are so frequently the people dying behind the wheel, he says.

The agency’s “Buzzed Driving is Drunk Driving” Web site and Facebook page are examples of that outreach. The NHTSA also recently sponsored a pre-St. Patrick’s Day Twitter event and site, complete with a video game and a “Don’t Drive Buzzed” e-card, to spread the word about the dangers of impaired driving.

A “Multithreaded” Approach to Safety
There’s no one single route to reducing the number of deaths on the road, Strickland says. The U.S. needs to employ a “multithreaded, comprehensive program” that covers driver behavior, vehicle crashworthiness and the development of crash-avoidance technologies that can save lives, he says.

The NHTSA last year introduced a new crash testing program for cars. It’s also focusing on testing and promoting the use of crash-avoidance technology, such as warnings for lane departures and forward collisions and electronic stability control systems or ESC. ESC is a technology that Strickland championed when he was on the staff of the Senate Commerce Committee and served as senior counsel for the Consumer Protection Subcommittee. Electronic stability control, which can prevent a rollover or a skid, will be required equipment by 2012 and has the potential of saving 10,000 lives a year, Strickland says.

The agency is also drafting voluntary guidelines for the auto industry to address whether some in-car technologies should be “interlocked,” or unavailable for use while driving because they pose too much of a distraction hazard, Strickland says. For example, you might not be able to program a car’s navigation system if you’re driving above a certain speed, he says. The guidelines should be ready by the fall of 2011, Strickland says.

Longer-term NHTSA research will focus on the issue of “cognitive distraction,” or how much of a mental load motorists can handle and still drive safely. The Department of Transportation’s anti-distraction campaign says that “available research” shows hands-free technologies can still pose a cognitive distraction for drivers. Ford, for one, contends that “cognitive distraction plays less of a role in crashes and near-miss events than previously believed.” Strickland says that if the NHTSA’s research and data points to cognitive distraction as an issue, “we will take steps to ensure safety.”

The Levers To Change Driver Behavior
Ultimately, though, safety first depends on an “attentive, responsible driver,” he says.

“At the end of the day, that’s your responsibility,” Strickland says. “You’re responsible for yourself and others.” The government wants to support driver safety by recommending or mandating safety features, but the driving public can’t rely on stability control, lane departure warnings or forward-collision alarms as its first line of defense, Strickland says.

To get drivers to change their own behavior for greater safety, three elements come into play, Strickland says: “strong laws, great enforcement and great education through high-visibility programs.” The real turning point comes when a society polices itself, he says.

“There’s only so many times a cop can pull you over,” Strickland says. It’s power of a society to influence its own members that “really can move the numbers” toward greater safety compliance, he says.

It worked with drunk driving, Strickland says. “In the 1980s, it still seemed OK to have a couple after work and drive,” he says. “We’ve changed that ethos. It’s still a problem with hard-core drinkers, but we’ve done great with casual drinkers. We’ve changed the social mores.”

Now, if people decide to have a drink, they’re much more likely to make a plan for getting home that doesn’t include driving impaired, he says. “People say, ‘I’ll make other plans. I’ll get a cab, or have a designated driver, or take the bus or walk home.’ That’s the power of the behavioral program.”

It also continues to work with seatbelt use. He gives the example of children who learn in school that everyone in the car should buckle up. And so kids harangue their parents until they put on their seatbelts, too.

The NHTSA hopes that same approach will work with such dangerous behaviors as texting behind the wheel. “Everyone recognizes that texting while driving is wrong. It’s bad — except when I choose to do it, because I do it well, right? Everyone else does it badly,” Strickland says, laughing. The goal is to turn texting into something that’s seen as a societal evil “so that someone will say something, do something and intervene.”

If I shoot an intruder, will my home insurance cover me?

 

Jill Overmyer

Does your home insurance policy cover acts of self-defense? If you think the answer is yes, you may be wrong. Whether you turn your dog loose on a prowler, punch a threatening neighbor or shoot a burglar, your homeowner’s liability insurance may not cover damages related to these acts of self-defense.

It’s all about intent

Even if the law recognizes your right to defend yourself, insurance companies see it differently, according to the International Risk Management Institute (IRMI). Policies often contain an intentional injury exclusion, which defines self-defense as an intentional act and therefore excluded from compensation. If someone is accidentally injured on your property, your home insurance liability coverage will cover medical bills and the resulting legal fees. But if you fire a gun at an intruder and you end up in court, the deliberateness of the act (even if it was in self-defense) means that your home insurance policy will not cover the resulting costs.

There is some disagreement about such exclusions, according to IRMI. Some courts have sided with insurers, while others have sided with homeowners. Some policies contain what’s called a “reasonable force exception.” If your policy has one, you’ll be covered for injuries you deliberately cause, as long as they result from the use of “reasonable force to protect persons or property,” according to IRMI.

What’s a homeowner to do?

If your policy doesn’t have a reasonable-force exception and you own a gun, you may want to consider extra coverage. Some specialty insurers offer self-defense coverage tailored to gun owners.

The National Rifle Association, for example, offers its members a self-defense insurance product provided by Lockton Affinity. It covers up to $100,000 or $250,000 for bodily injury and property damage (depending on which option the insured chooses). It also covers up to $50,000 in criminal and civil defense costs. When it comes to criminal charges, however, the charges must be dismissed or the insured must be acquitted for the claim to be paid.

Alliant Insurance, meanwhile, offers coverage tailored to retired law enforcement officers. It covers court costs, as well as expenses of up to $250 a day if the insured person has to miss work because of a trial.

You may not like thinking about the possibility of having to physically defend yourself. But if you own a gun, you may want to get insurance that covers you in this worst-case scenario.

You, disabled? What are your chances?
 

Higher than you probably think. You can ignore the problem, but it’s hard to ignore the facts:

  • Just over 1 in 4 of today’s 20 year-olds will become disabled before they retire.
  • Freak accidents are NOT usually the culprit. Back injuries, cancer, heart disease and other illnesses cause the majority of long-term absences.

Are you prepared if it happens to you? Probably not. If you’re like most Americans, you don’t have disability insurance. Or enough emergency savings to last 31.2 months. Yes, that’s the duration of the average long-term disability claim.

If you become disabled, will you be ready? Or will you and your loved ones face serious financial hardship, possibly foreclosure and even bankruptcy? Good news. The Council for Disability Awareness can help you prepare for disability the same way you plan for other emergencies. Here’s how.

What coverage is included in a standard homeowners insurance policy?

A standard homeowners insurance policy includes four essential types of coverage. They include:

  1. Coverage for the structure of your home.
  2. Coverage for your personal belongings.
  3. Liability protection.
  4. Additional living expenses in the event you are temporarily unable to live in your home because of a fire or other insured disaster.

1. The structure of your house

This part of your policy pays to repair or rebuild your home if it is damaged or destroyed by fire, hurricane, hail, lightning or other disaster listed in your policy. It will not pay for damage caused by a flood, earthquake or routine wear and tear. When purchasing coverage for the structure of your home, it is important to buy enough to rebuild your home.

Most standard policies also cover structures that are detached from your home such as a garage, tool shed or gazebo. Generally, these structures are covered for about 10% of the amount of insurance you have on the structure of your home. If you need more coverage, talk to your insurance agent about purchasing more insurance.

2. Your personal belongings

Your furniture, clothes, sports equipment and other personal items are covered if they are stolen or destroyed by fire, hurricane or other insured disaster. Most companies provide coverage for 50% to 70% of the amount of insurance you have on the structure of your home. So if you have $100,000 worth of insurance on the structure of your home, you would have between $50,000 to $70,000 worth of coverage for your belongings. The best way to determine if this is enough coverage is to conduct a home inventory.

This part of your policy includes off-premises coverage. This means that your belongings are covered anywhere in the world, unless you have decided against off-premises coverage. Some companies limit the amount to 10% of the amount of insurance you have for your possessions. You have up to $500 of coverage for unauthorized use of your credit cards.

Expensive items like jewelry, furs and silverware are covered, but there are usually dollar limits if they are stolen. Generally, you are covered for between $1,000 to $2,000 for all of your jewelry and furs. To insure these items to their full value, purchase a special personal property endorsement or floater and insure the item for it’s appraised value. Coverage includes “accidental disappearance,” meaning coverage if you simply lose that item. And there is no deductible.

Trees, plants and shrubs are also covered under standard homeowners insurance. Generally you are covered for 5% of the insurance on the house—up to about $500 per item. Perils covered are theft, fire, lightning, explosion, vandalism, riot and even falling aircraft. They are not covered for damage by wind or disease.

3. Liability protection

Liability covers you against lawsuits for bodily injury or property damage that you or family members cause to other people. It also pays for damage caused by your pets. So, if your son, daughter or dog accidentally ruins your neighbor’s expensive rug, you are covered. However, if they destroy your rug, you are not covered.

The liability portion of your policy pays for both the cost of defending you in court and any court awards—up to the limit of your policy. You are also covered not just in your home, but anywhere in the world.

Liability limits generally start at about $100,000. However, experts recommend that you purchase at least $300,000 worth of protection. Some people feel more comfortable with even more coverage. You can purchase an umbrella or excess liability policy which provides broader coverage, including claims against you for libel and slander, as well as higher liability limits. Generally, umbrella policies cost between $200 to $350 for $1 million of additional liability protection.

Your policy also provides no-fault medical coverage. In the event a friend or neighbor is injured in your home, he or she can simply submit medical bills to your insurance company. This way, expenses are paid without a liability claim being filed against you. You can generally get $1,000 to $5,000 worth of this coverage. It does not, however, pay the medical bills for your family or your pet.

4. Additional living expenses

This pays the additional costs of living away from home if you cannot live there due to damage from a fire, storm or other insured disaster. It covers hotel bills, restaurant meals and other expenses, over and above your customary living expenses, incurred while your home is being rebuilt.

Keep in mind that the ALE coverage in your homeowners policy has limits, usually a percentage of the amount of coverage you have on your home, and some policies include a time limitation. But the amount of ALE coverage is separate from the amount available to rebuild or repair your home. For example, suppose you have a policy that provides up to $150,000 in rebuilding costs and up to $15,000 (10 percent) for ALE and you use up the entire $15,000, your insurance company will still pay what it costs to rebuild your home up to the policy limit of $150,000.

Coverage for additional living expenses differs from company to company. Many policies provide coverage for about 20 percent of the insurance on your house. You can increase this coverage, however, for an additional premium. Some companies sell a policy that provides an unlimited amount of loss-of-use coverage, but for a limited amount of time.

If you rent out part of your house, ALE coverage also reimburses you for the rent that you would have collected from your tenant if your home had not been destroyed.

What is an Annuity?

An annuity can be a great retirement investment vehicle. Annuities have some of the same benefits as other retirement plans such as the 401K plan or an individual traditional IRA. An annuity typically doesn’t have contribution limits, income limits, or mandatory withdraws like the other plans. Even though with an Annuity your after-tax dollars are used for contributions, the retirement earnings still grow tax-free.

Types of an Annuity

There are two types of Annuities, fixed annuities and variable annuities. A fixed annuity gives you a pre-set interest rate on earnings which is guaranteed for a certain term. Variable annuities are invested among stocks, bonds, and money market accounts similar to a 401K plan or a traditional IRA.

Advantages of Variable and Fixed Annuities

Not only are Annuities a retirement vehicle, they also carry an insurance component. Depending on the policy you choose, there are insurance choices available to you such as guaranteed death benefits, guaranteed payments for as long as one lives, or even payments for the life of your beneficiary.

Who are Annuities Suitable for?

People that have already maxed out their 410K plan or traditional IRA and have additional capital to invest would be an ideal Annuity candidate. Another suitable person would be an individual who has retired and fear they might outlive their money. A Annuity would give a retiree a guarantee income for the rest of their life. Anyone who is looking to protect their finances would also be a great candidate because the fact that annuities are a type of life insurance means they are immune to litigation.

Purchasing a 401K plan, Traditional IRA, or Annuity

When purchasing any investment such as a 401K, IRA, or annuity, it is important that you conduct a good deal of research and chooses a strong, reputable company. And, since all annuity policies are different, the policy holder will want to compare and understand all fees, surrender charges, and tax advantages of their particular annuity policy.

Tips for getting the best insurance quotes.

 

General insurance tips:

  1. Have your current insurance policy with you when requesting your insurance quotes.
  2. Consider a higher insurance deductible.
  3. Place all of your insurance policies with the same company to qualify for a multiple policy discount.

For car insurance quotes

  1. Be sure all vehicle discounts are applied (Anti-lock brakes, Alarm system, daytime running lights, vin-etching, etc.).
  2. Take a defensive driving course.
  3. Be very accurate about your mileage to and from work.
  4. Ask about affinity discounts.

For a homeowners insurance quotes

  1. Be sure that your home is insured to its value
  2. Be sure all home discounts are applied (Alarm, smoke alarms, fire extinguishers, dead bolt locks, etc.).
  3. If your older home has been renovated, tell your agent.

For a life insurance quotes

  1. Consider level premium term insurance.
  2. If you are a smoker, quit for at least 13 months and request that your insurance company consider you for a nonsmoker insurance rate.

For a health insurance quotes

  1. Consider a higher co-payment or deductible.
  2. Join a group health insurance plan.

For a long-term insurance quotes

  1. Consider a longer elimination (waiting) period.
  2. Purchase coverage when you are young (premiums are lower).
  3. Pick a daily benefit based on where you live.

Long-term care insurance: 12 questions to ask

Those who aren’t getting older can skip this story.

Still with us? Good. You are getting older, and at some point, your body will break down. Here are some scary statistics: Studies indicate that as many as 40 percent of Americans over 65 will spend time in a long-term care facility, that more than 70 percent over 65 will use some form of home health care, and that a year in a nursing home can cost anywhere from $40,000 to $100,000 or more today, with costs likely to more than quadruple 30 years from now.

Considering these factors, long-term care insurance may be the most important purchase you ever make.

Unfortunately, long-term care insurance policies are complex, and seemingly minor details can make a tremendous difference in the level of care you eventually receive. You’ll need to sample a variety of policies, ask lots of questions and have your broker or agent explain the intricacies of the policy in detail because what may seem minor now could mean the difference between being covered or not at a crucial time.


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The following 12 questions will help unravel the complexities and gather the information hou need in shopping for a long-term care policy, including whether you should be shopping for one at all.

Why buy long-term care insurance?

There are many elderly people who, due to some physical or cognitive disease, are unable to care for themselves. Long-term care insurance could potentially cover nursing homes, assisted living facilities, adult day care, in-home care and other functions that help us get through everyday life. It is NOT medical insurance; it is simply for everyday life functions and living.

It is also not, however, just for the elderly. If a person in his 30s were to purchase long-term care insurance, and soon after become paralyzed in an accident, or be diagnosed with a degenerative disease, he could then be covered for life as far as functioning care — depending on the individual policy.

What happens if I get sick and don’t have this insurance?

If a person is in need of, let’s say, a nursing home, and is without insurance, the home would need to be paid for out of the person’s assets. Government assistance would usually not kick in until not only that person’s assets were virtually depleted, but the assets of their spouse as well, if that assistance were available at all. Therefore, anyone with assets to protect may want to consider this insurance.

At what age should long-term care insurance be purchased?

It is sometimes advised that people 60 and over should be looking at this insurance. However, there are a few reasons to reconsider this advice, and instead think about purchasing it as early as possible.

Reason one is that, as stated above, a life-changing occurrence can occur at any age. If you are left paralyzed at 30, you could conceivably need life assistance of some sort for the next 60 years. If you’re covered, you could be set. If not, it’s too late.

But the second and less-obvious reason is that purchasing the policy at a younger age may cost less overall than purchasing it when older, even accounting for inflation. If you’re shopping for this policy at a younger age, ask your financial adviser to compare your purchase now with a purchase at 60. You may find the numbers work more favorably if you purchase now.

Where should I shop?

Once you make the decision to purchase long-term care insurance, you need to go shopping. While there are several big insurance companies that offer the insurance, you should also consider working with an independent broker.

Clay Cotton is a former broker, and founded the National Advisory Council for Long Term Care Insurance in late 1996. Ironically, Cotton, now 53, hadn’t yet purchased this insurance for himself, but was preparing to in 1997 when he was diagnosed with multiple sclerosis. Now, he’s ineligible. He did however, purchase a policy for his wife Suzanne, who was soon after diagnosed with hepatitis C.

Cotton is a strong advocate of using independent brokers to purchase insurance (and has a list of them on his Web site), as opposed to agents bound to one company, who he calls “captive” agents.

“Avoid a captive agent,” advises Cotton. “They can only sell you their company’s party line. If that company doesn’t have favorable wording on things like the deductible, that’s all that agent has to offer.”

Cotton also recommends consumers read the National Association of Insurance Commissioners’ “Shopper’s Guide to Long Term Care Insurance,” a booklet that most insurance agents and brokers who sell that insurance will carry.

How expensive is long term care insurance?

Of course, this number can vary wildly depending on numerous factors, age being the most important. For people in their 30s, the insurance may cost in the $400-per-year range, while that can increase closer to $1,000 per year for those in their 50s and 60s.

What type of setting for coverage does the policy provide?

While the wording may differ per policy, there are three basic categories into which care may fall: home settings, assisted living and skilled nursing facility. The ideal policy will cover all three, since you never know which you’ll need. You could wind up with a condition that could be cared for at home, but if your policy covers only nursing home care, you may be out of luck, or maybe prematurely forced into a nursing home.

Conversely, if you’re only covered for home and assisted living care, you’re out of luck if your condition worsens to the point where you need the full-time skilled care only a home can provide.

How long will the policy pay out once it’s triggered?

The best is an unlimited payout, but there are policies that cover smaller increments of time, such as four years or six years. You’ll need to weigh what you can afford against how much you’re willing to gamble you’ll need. Obviously, the longer coverage is provided, the better.

What triggers the policy?
Different policies dictate different reasons for the policy to kick in, such as cognitive impairment, failure of ability to perform daily activities, and medical impairment. But not all policies allow for all reasons, and some policies even refuse to consider medical necessity as a trigger. Make sure you understand the policy’s trigger, and try to find one that will include medical necessity.

Also, certain policies require you to be hospitalized before any nursing home or home health care benefits kick in. Try to find a policy without this restriction.

How much will it pay out every day?

Some policies may cover expenses totaling more than $50 or $75 per day, and others may cover $200 and up. All are different. Make sure you fully understand the payout policy on any coverage you’re considering. In doing so, take into account the difference in potential nursing home costs where you are. For example, the cost of a nursing home in New York may run $300 to $400 per day, while a home in the Midwest may be less than $100.

What is the deductible?

This part gets especially complex. These policies can measure the deductible not in dollars, but in days. A policy’s deductible may run 30 days, 60 or 120. And, the length may mean different things, depending on the policy’s wording. The days may be consecutive, or not. The deductible that’s right for you will depend on your ability to cover your own costs until the policy kicks in.

Be sure you fully understand the implications of the deductible before signing on, and weigh it against your projected assets at age 70 or 80. This is one topic you should definitely discuss with your financial adviser.

Does the policy have inflation protection?

Many policies include a clause that increases your benefit with inflation, without raising your premium. Be sure to ask about it.

Does your policy allow for shared care?

Some policies allow you to link your policy with your spouse’s, so that if your coverage runs out, you can draw on your spouse’s coverage. Discuss with your spouse if this is something you want to have.

Make sure you fully understand every aspect of a policy before signing on, as any detail could make a big difference come redemption time.

Do’s And Don’ts When Insuring Your Home

 

DO:
1) Recognize that underinsurance after a total loss is a very common problem. Many homeowners find themselves underinsured after a total loss even though they followed their agent or insurer’s recommendations. If you find yourself in this position, get educated and enforce your rights. The promise of security that insurers advertise and sell is part of the contract you paid for. It’s up to you to enforce your rights under that contract. Search UP’s website for details on underinsurance. www.unitedpolicyholders.org.

2) Establish a contact at a reputable insurance company, agent or broker’s office that is qualified and authorized to advise you on properly insuring your home. The advice you’ll get from an agent that only represents one insurance company will be different from the advice you’ll get from an “independent” agent or broker that represents several competing companies.

3) Be specific that you want to make sure your home is properly insured and that you want to buy full replacement coverage. Many agents fear that if they tell you the true cost of fully insuring your home you will go elsewhere to find a cheaper policy. Be clear that you will pay a fair premium for full replacement coverage and insist you don’t want to gamble or underinsure your home.

4) Answer all questions truthfully so the insurance company knows the size of your home, other structures, the style of construction, major improvements, unusual features and your high value personal property items.

5) Follow the insurer, agent or broker’s recommendations on increasing or maintaining your limits. Get and keep a record of the insurer, agent, or broker’s confirmation that your limits are adequate.

6) For extra security, buy the highest percentage replacement cost endorsement you can afford. This is a “fudge factor”. If you suffer a major loss and it turns out your insurer set your limits too low, this endorsement is designed to bridge the gap. Replacement cost endorsements are sold as percentage amounts above your stated dwelling limits. Most insurers offer 25-100% above limits. Shop around for this important protection.

7) Figure out the cost to replace your contents and adjust your policy limits accordingly. Some items such as jewelry, art items and collectibles may be better insured if they’re specifically listed in your policy contract. This is known in the industry as “scheduling.” Scheduled personal property items are listed with separate coverage limits in a document that becomes part of the policy contract.

8) Make sure you have enough contents coverage. A replacement cost endorsement that increases your dwelling limits may not also increase your contents limits. Most insurers set the limits for your possessions, (“contents”) as a percentage of the limits on your dwelling. Contents limits are typically set at 50-75% of dwelling limits. Most insurers sell a replacement cost endorsement that only increases dwelling limits. This means your contents limits will stay at the amount stated on your “declarations page” even if the replacement cost endorsement kicks in to increase your dwelling limits. A few insurers sell a policy that allows both dwelling and contents limits to increase. If yours doesn’t, make sure you get confirmation that your limits in all categories are high enough or buy coverage elsewhere.

9) Make sure your policy offers adequate coverage for building code upgrades. The safest bet is full building code upgrade coverage, which is available from companies such as Fireman’s Fund, Safeco, Chubb, and Allied. Most other insurers offer either an extra 10% for building code upgrade coverage or a flat $25,000.

10) Your Additional Living Expense (ALE) limits should cover rent, etc. for at least two years after a total loss. Many companies require you to use your ALE coverage within 12 or 24 months after a loss, even if you haven’t exhausted the limits. This can be a problem because it always takes longer to rebuild than you anticipate, especially in a disaster area. If your insurer only offers 12 months of ALE, consider switching to a competitor. You may not have to pay a lot more for better ALE coverage. If your insurer offers a fixed dollar amount with no time limitation, divide that amount by 24 months to compare the coverage. Some policies refer to ALE as “Loss of Use.”

11) Make sure you tell your agent about improvements to your home. Most carriers require you to report any renovations costing $5,000 or more.

12) Take steps to make your home eligible for better, cheaper coverage. To qualify for the best coverage, homeowners need a newer roof, updated plumbing, wiring, heating system, and a bolted foundation. Ask your agent what you can to do to lower your risk of loss.

13) Opt for higher deductibles. Increasing your will lower your premium. You’re generally better off paying small claims out of pocket anyway, especially until insurance regulators reign in “use it and lose it”. “Use it and Lose It” refers to some insurers’ recent practice of refusing to renew the policies of customers who file claims. This allows insurers to continue to collect premiums but shrink payouts by discouraging customers from filing claims…use your insurance, lose your insurance!

14) Avoid extra headaches after a loss: Photograph or videotape your home and contents and store copies of the photos or the negatives off-premises.

15) If your agent contacts you at renewal time to review your coverages, spend time with him or her discussing your policy limits and insist again that you want to make sure you’re fully insured.

16) To be extra safe, check the dwelling limit (“Coverage A”) that appears in your policy against what you know about your home and construction costs in your area. If they don’t match, ask your agent or insurer to explain why they don’t. Contact reputable homebuilders in your area to determine the current range of per square foot construction prices for your type and size home. Apply that range to your home; add at least 15-20% to account for future price increases and post-disaster price spikes and compare it with the dwelling limits your insurance company has set. Discuss and resolve any discrepancies with your insurer, agent or broker.

17) Double check the formula your agent or insurer used to set your dwelling limits (“Coverage A”). Ask the agent or insurer to send you a copy of the worksheet he or she used to calculate the cost to rebuild your home. Some insurers give their agents worksheets that are designed for calculating homes less than 3,000 square feet with newer construction. These worksheets may cause homes that have unique characteristics or higher quality of materials to be underinsured. If your home is large enough, your insurer may send out an appraiser, and if they do, make sure you get a copy of the appraiser’s report.

DON’T:
1) Don’t rely on the purchase, appraised or estimated sale price of your home to set your dwelling limits. That is not predictive of the cost to rebuild.

2) Don’t be penny-wise and pound-foolish by buying the lowest priced homeowners policy. Your home is your biggest asset – make sure it’s covered.

3) Don’t understate the size and amenities of your home to get a lower premium quote.

4) Don’t underestimate your personal possessions. You’ll be surprised how much it costs to replace what you had if you suffer a major loss.

5)
Don’t be afraid to switch insurers to get a better policy. Loyalty doesn’t benefit you in this context. Many homeowners pay premiums to an insurer for 20 years without ever filing a claim, but when they suffer a major loss and find themselves underinsured – that customer loyalty doesn’t matter. Don’t expect your insurer to reward you by increasing your limits without a fight, just because you’ve been a long time customer. It just doesn’t happen.

6) Don’t wait until after a loss to get appraisals of valuables. Do store copies off-premises.